Top Wall Street cop: Heads are going to roll

Manhattan U.S. Attorney Preet Bharara argued Monday that the government had gone too easy on corporations in recent years, and that corporate felony charges could be in the offing.

"You can expect before too long a significant financial institution will be charged with a felony or made to plead guilty to a felony where the conduct warrants it," Bharara said at the Securities Industry and Financial Markets Association annual compliance and legal society seminar in Orlando, Fla.

Invoking prosecutors' widespread hesitancy to file criminal charges since the accounting firm Arthur Andersen went out of business after being indicted in 2002, he added that "the pendulum has swung too far" toward what he called "a presumption of prosecutorial immunity" on the part of corporations.

Bharara's office has already indicted at least one significant player: SAC Capital, the Stamford, Conn., hedge fund that pleaded guilty late last year to securities fraud after a rash of current and former employees were charged with insider trading.

More recently, Bharara and his colleagues at the Justice Department have tangled with JPMorgan Chase, which in November paid a record $13 billion to settle charges that it misled investors about the quality of certain mortgages. Other cases against the large bank are still pending.

On many occasions, Bharara said, Wall Street firms being targeted by his office in investigations argue that terrible consequences will follow if tough sanctions are levied—a huge drop in the stock, for instance, or executives walking away from their leadership roles.

"What I have found typically is that, in reality ... the sky does not fall," Bharara said. "In fact, sometimes the sky brightens: stock prices remain steady, or go up, as the company is viewed as putting problems behind it, clients and customers and key employees don't even bat an eye, and sometimes, the CEO even gets a raise."

Bharara's reference to rising stock prices and CEOs getting pay increases may have been an allusion to JPMorgan. The company's stock has risen 28 percent in the past year while its CEO, Jamie Dimon, received a large raise for his performance in 2013, despite the mortgage-fraud settlement and a confluence of other high-profile cases.

A JPMorgan spokesman declined to respond to whether the comments were a dig. But an analyst who covers the bank dismissed Bharara's comments as toothless. "If that's what he wanted," the analyst said, referring to the idea of a JPMorgan indictment, "why didn't he stipulate that? What is he actually trying to accomplish?"